Yahoo Finance

George Kilguss III

Thanks, Jim, and good afternoon, everyone. For the quarter ended March 31, 2025, the company generated revenue of $402 million, up 4.7% from the same quarter a year ago. Operating expense in Q1 2025 totaled $131 million, which compares to $132 million last quarter and $125 million for the first quarter a year ago. While similar sequentially, the year-over-year increase in expense is mainly due to a slight increase in headcount and incentive-based compensation accrual adjustments.
Net income in the first quarter totaled $199 million compared to $191 million last quarter and $194 million a year ago, which produced diluted earnings per share of $2.10 for the first quarter this year compared to $2 last quarter and $1.92 for the same quarter of 2024. During the quarter, the company issued 500 (technical difficulty) of new 5.25% senior notes due 2032 to refinance the company's existing $500 million, 5.25% 2025 senior notes, which matured on April 1.
Operating cash flow for the first quarter of 2025 was $291 million, and free cash flow was $286 million compared with the $257 million and $254 million, respectively, in the year ago quarter. I'll now discuss our updated full year 2025 guidance. Revenue is now expected to be between $1.635 billion and $1.650 billion.
Operating income is now expected to be between $1.110 billion and $1.125 billion. Interest expense and non-operating income net, which includes interest income estimates, is still expected to be an expense of between $50 million and $60 million.
Capital expenditures are still expected to be between $30 million and $40 million. And the GAAP effective tax rate is still expected to be between 21% and 24%. In summary, VeriSign continued to demonstrate sound financial discipline during the quarter.
Now I'll turn the call back to Jim for his closing remarks.

D. James Bidzos

Thank you, George. I'd like to acknowledge and thank George for his 13 years of service to VeriSign as Executive Vice President and Chief Financial Officer. George has been instrumental in providing outstanding financial acumen and leadership to our operations and our teams, and we wish him the best in retirement.
John Calys, Senior Vice President, Global Controller and Chief Accounting Officer, has served as Interim CFO in the past and has worked closely with George over many years and will become Chief Financial Officer upon George's retirement at the end of May, making for a seamless transition. Thanks for your attention today. This concludes our prepared remarks, and now we'll open the call for your questions. Operator, we're ready for the first question.

Question and Answer Session

Operator

(Operator Instructions)
Ygal Arounian, Citigroup.

Ygal Arounian

Hey, good afternoon, guys. Thanks. I'll start with George. Congrats on the retirement, George, and good luck on the next step. And I guess you left invest just a little bit of a parting gift here on the dividend. Can you elaborate a little bit on the timing of why now is the right time to initiate a dividend? And on the comment that doesn't change how you think about total shareholder return, does that mean that we should expect less buybacks because of the dividend? Or maybe you could just put it in the context of that? And then I'll have some follow-ups.

D. James Bidzos

Hi, Ygal, it's Jim. Let me answer part of that question for you. Maybe I'll invite George to comment further. But well, first of all, we're pleased to be able to diversify the method of shareholder return to now include regular dividends. I don't think there's much more to say than what I covered in my prepared remarks.
The company has had a long track record of returning excess cash to shareholders and has been considering the quarterly cash dividend for quite some time. Today's announcement is consistent with that long track record and with our expectations of and confidence in the continued stability and strength of our business.
George, did you want to add anything?

George Kilguss III

Yes. Ygal, I think, as Jim said, we're just diversifying our return of capital to shareholders. And we'll continue to go through our strategic framework of how we think about capital allocation as we've done in the past. And I think you'll see us do a combination of the two. But clearly, it's really a statement of the company's a stability in our business model, and we just think it's the right time to start diversifying that method of return of capital.

Ygal Arounian

Okay. Thanks. And then so two follow-ups on the business and the trends. So with 1Q domain name base outperforming your expectations, you're taking up your outlook for the year because of that. Can you just talk about what you think were the biggest drivers of the outperformance relative to what you were expecting at the beginning of the year?
And as we kind of work our way through the rest of the year, particularly with some of the macro questions, what are the factors that get you to the low end of the range versus the high end of the range over the course of the rest of the year? And then second question on .net. We didn't get the pricing increase in February like we have in the past few years. Just any updated thoughts on how you're thinking about pricing there? Thank you.

George Kilguss III

Sure, Ygal. It's George. So with regard to our guidance, you're right. We're off to a solid start of the year, delivering 770,000 net adds here in Q1. And as a result, we took the guidance up, as Jim mentioned, from down 0.7% to positive 0.9%, which is a range of about 1.2 million names down to 1.5 million names up with a midpoint of about 200,000 there.
I think at the end of the day, what the guidance is really reflecting is the positive trends we're seeing here. But as Jim mentioned, it also reflects a measure of caution as we're still early in the cycle and the macroeconomic outlook is a bit unclear.
We also have some seasonality to the domain name base in the first quarter, which is typically our strongest. But I think we're encouraged by the results. And the activity of our registrars and hence, we took the guidance up pretty substantially here in Q1.
As regards to your second question on .net price increases, I think you're aware that we really don't provide guidance with regard to pricing changes for our TLDs, but we do have to provide a six month notice of any potential changes that we make.
For .net, our last price increase became effective in February 2024, which placed our wholesale price for .net at $10.91. We, of course, regularly review our pricing strategies in conjunction with our go-to-market strategies for our TLDs. But as I mentioned, we don't provide pricing guidance for them as well.

Ygal Arounian

Great. Thank you so much.

Operator

Rob Oliver, Baird.

Rob Oliver

Great. Thanks, guys. Good afternoon. I appreciate it. I have a couple of questions. Jim or George, I'll start with you guys first. Just on some of the activities around your marketing channel programs that you guys sort of kicked off last year. Would love to get an update on those, how -- what sort of traction you're seeing with them? George, I know you just commented that you were encouraged by the registrar activity generally.
I think part of that might be registrars reengaging, but I would love to understand what portion of that is action you guys are taking and where you're seeing success with your marketing channel programs? And then I had a couple of follow-ups.

George Kilguss III

Yes. Sure, Rob. To answer your question with regard to marketing programs. So as we mentioned over the past few quarters, we rolled out a variety of new programs late in 2024 and early 2025. To date, we've seen good registrar interest in those programs. While it's still early, we do attribute some of the improved new registration trends we saw in the fourth quarter and here again in the first quarter to a registrar engagement with the programs that we rolled out.
I would call our activity that we saw here in the last two quarters, activity from what I would call early adopters of the programs that we rolled out last year. We'll also have some registrars that are continuing to test the programs that we rolled out here in 2025.
So we'll continue to monitor and work with the registrar community here to help them engage in our programs throughout the year. But I think early results are we're encouraged by them, but I think we still have some work to do.

Rob Oliver

Great. That's helpful. Thanks. I appreciate it. Jim, on the strong domain guide, I think you said that it includes a measure of caution relative to the macro, which I think were your words. And I'd love to hear your take on the macro because on the one hand, it seems as if the registrars are starting to spend more, and we were super encouraged to see two leading registrars pony up for Super Bowl ads, which I think that was the first time in a handful of years that we've been tracking it that we saw that sort of a financial commitment, which was a positive.
But obviously, there are some concerns on the macro right now. So I would love to hear just from you kind of what your take currently is on the macro. I guess it's a variance on Ygal's question earlier about how we might get on one or other end of that range?

D. James Bidzos

Sure. I'll give it a shot here. I think, first of all, the components of all those pieces are, first of all, some things that we laid out last year that we would do and some things that we expected to shift favorably. So there are a couple of tailwinds that we thought would shift to headwinds, and it looks like that's beginning to happen a bit, a return to new customer acquisition and the focus on ARPU by the channel. And as you -- Super Bowl, for example, is clearly an indication of spend on new customer acquisition. So that's a favorable shift that we've seen since then.
The things that we've done in our marketing programs that we've mentioned before, for example, we offered a range of programs simply as a way of providing needed flexibility in what was an evolving channel. It had changed. Traditional registrars, yes, of course, there are customers, but also we had website builders, et cetera. So one-size-fits-all approach didn't work as well. I think that's where we're seeing some interesting promising take-up even though it's a bit early.
I think the other thing that the component that we really can't identify is just I'm certainly not an economist, but I think I can recognize a bit of turmoil here, and I think it's just clarity. It's a question of clarity. As that clarifies, I think we'll get a better idea of where the future is and offer any updated guidance, of course, as appropriate. But this is just based on it being early in the year, a bit of uncertainty about where things will land. Hopefully, they will shortly, and we'll be able to give you better info.
But we are certainly appreciative of the positive changes that we've seen. As I said, we've done what we can control, and we're seeing some results from that, and they trend favorably. And also, we are picking up some headwinds that have shifted into tailwinds that are helping us return to -- getting off ARPU and returning to new customer acquisition by the registrars, programs that are working for them. So those are the different components. The uncertainty is obviously the macroeconomic environment, which we just need more clarity on before we can get more comfortable.

Rob Oliver

Got it. Okay. Helpful. Yes, and else. I had two other quick ones. One, John, welcome. And George, congratulations on your retirement. I guess just a quick question about some of the higher expenses that George had called out. Is this a new run rate of higher expenses? And just would love to get a sense from you of kind of your philosophy relative to that expense run rate?

John Calys

Hey, thanks, Rob. This is John. If you look at the midpoint of our operating income guidance for the year, it implies a slight improvement in our operating margin, but it also implies a slight amount of spend that we incurred as a similar amount of spend that we incurred in the first quarter for the balance of 2025.
As George mentioned in his prepared remarks, this is mainly due to slight increases in headcount and some of our incentive-based compensation programs. As in past quarters, we'll continue to focus on disciplined expense management and do that within our strategic framework.

Rob Oliver

Got it. Great. Thanks. Look forward to working with you. And then last one for me is just any update from you guys on .web or anything we should be aware of there? Thanks very much.

D. James Bidzos

Thanks, Rob. Jim here. We do have a small update on .web. Just as in the first IRP, think arbitration IRP, this new IRP panel that we have has again rejected Altanovo's attempt to invalidate certain procedural rules in the hopes that doing so would exclude our participation in these IRP proceedings. With that effort rejected. We anticipate a ruling soon on our application to participate in the IRP and the final hearing in November.
To reiterate, VeriSign, we intend to become the registry operator for .web, and we intend to bring this new TLD to our customers as soon as we can. We believe Altanovo's use of ICANN's processes to stop this from happening is an abusive process and is being pursued in bad faith to keep .web off the market. So that's the update this quarter.

Rob Oliver

Okay. Alright. Great. I'll digest that, and then I'll come back to you guys, probably in the callback or with some follow-up questions. But really appreciate your time. Thanks very much.

D. James Bidzos

Thank you.

Operator

Thank you. This concludes today's question-and-answer session. I will now turn the call back to David Atchley for final comments.

David Atchley

Thank you, operator. Please call the Investor Relations department with any follow-up questions from this call. Thank you for your participation. This concludes our call. Have a good evening.

Operator

This does conclude today's call. Thank you for your participation. You may now disconnect.